Tuesday, October 20, 2009

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

The holder of a $5 McDonald’s gift card has standing to sue fast food giant McDonald’s under California law based on McDonald’s alleged failure to redeem the card for cash, the federal district court in San Diego has ruled.

The California gift certificate statute (CCH Advertising Law Guide ¶30,515) provides that any gift certificate with a cash value of less than $10 is redeemable in cash. The statute defines “gift certificate” to include gift cards.

In a class action complaint, the gift card holder asserted claims under the California Unfair Competition Law (UCL) and the common law of unjust enrichment based on violation of the gift certificate statute.

Standing

McDonald’s argued that the gift card holder lacked standing to assert a UCL claim because he could still redeem his gift card for McDonald’s products and therefore did not lose money or property as a result of the unlawful conduct.

The holder responded that he did not want McDonald’s products and that McDonald’s unlawful conduct had caused him to keep the gift card that could only be used for products he did not wish to consume.

The court held that the holder had standing to pursue the UCL claim based on his allegation that he was denied money to which he had a right under the gift card statute. Likewise, the holder had standing to sue on the ground that McDonald’s was unjustly enriched by its practice of refusing cash redemptions on unused card balances of less than $10.

False Advertising

The holder also brought a UCL claim based on the California False Advertising Law, but the court rejected this theory.

The holder alleged that a statement on the back of the card—“[t]he value on this card may not be redeemed for cash . . . unless required by law”—was deceptive and misleading. The holder maintained that the statement led average consumers to believe that they could not redeem gift cards for cash and failed to disclose the right to redeem cards with balances of less than ten dollars for cash.

The holder’s false advertising theory failed, in the court’s view, because he did not allege that he relied on the language on the back of the gift card and, as a result of that reliance, lost money or property.

The September 21, 2009 opinion in Marilao v. McDonald’s Corp. will be reported at CCH Advertising Law Guide ¶63,615 and CCH State Unfair Trade Practices Law ¶31,917.